Business Objectives and Stakeholder Objectives (Copy)

Business objectives

Business objectives is an aim or target that a business work towards.

• Give direction to workers and managers
• JHelps in decision taking
• Allow for same goal of the whole business
• Comparison of business’s performance against objectives.

There are different types of objectives that business can set

• Survival

  • Every business needs to survive, which means continue
  • Especially important when a new business has been set up or at time wheneconomy is facing recession
    • Fall in average demand for goods and services in an economy.

• Profit

  • Private businesses have this as the main aim mostly.
    • It helps pay a return to owners for their investment
    • It provides finance for more investment
  • Business focuses on satisfactory level of profits so that too much tax does not have to paid and not long hours have to be worked.

• Return to Shareholders

  • Shareholders provide finance to the business inform of investment
  • Their return can be increased by increasing profit so they got more dividend
  • It can also be increased by increasing share price, this is possible by business growth and higher future profits

• Growth

  • Major aim for owners and managers
  • Usually measured by increase in value of output or sales
  • Benefits
    • Makes jobs more secure
    • Salary of managers increases
    • Business can diversify in new products and spread risks
    • Market share can be increased from the growth in sales
    • Economies of scale can be achieved
  • Its only beneficial as long as customers are satisfied
  • Overgrowth can cause diseconomies of scale

• Market share

  • It is the percentage of total market sales owned by the company
  • Company’s sales x 100 / total sales in the market
  • Increased market share
    • Improves publicity making the business popular
    • Better suppliers and supplier discounts
    • Increased influence over customers

• Service to society

  • Social entrepreneurship focuses on private businesses that do not just focus on profit. Instead they focus on the other aspects as well
    • The social aspects like providing jobs etc
    • Environmental aspects such as protecting the environment
    • Financial aspect such as making profit tp invest back and increase the social work of the firm.

Why business objectives change

• Time frame: a new business that has survived can now focus on profits
• If higher market share has been achieved then more can be now given back to shareholders
• If the economy goes into recession then the main aim shall be cost cut and survival

Stakeholders

These are the people with the direct interest in the performance and activities of a business organization

• Owners

  • They put capital to start the business, take a share of profit if there is success and bear the loss if not, they take the risk
  • They require share of profit to get a return on what they have invested and they require the growth of business so that the value of their investment increases.

• Workers

  • They work for the business and are its employees, they follow the instructions of manager and may have to train too, they can be on part time or full time basis and can be temporary or permanent, if the workers are not required they can be made redundant (told to leave despite no mistake of their own)
  • They require payment for their work regularly, a contract of employment to make them more secure, job security so they know they wont be thrown out and a job with satisfaction and motivation.

• Managers

  • They are employees too who control other employees, are the decision takers where successful decisions can make businesses more successful while unsuccessful decisions can ruin the business
  • They require high salaries due to the nature of their work and job security. They also want the business to grow as it increases their prestige and status

• Customers

  • Extremely important to business as they consume the products. If a business does not have enough customers it will fail – thus successful businesses respond to customer needs
  • They require a product that gives them value for their money, is safe and reliable and well designed with good quality. There must be reliable maintenance and service too

• Government

  • Responsible for the nation’s economy, and law passing for protection of employees and customers
  • Successful businesses help achieve government aims by providing employment and developing infrastructure etc. This increases the country’s GDP. However, the government also expects them to stay within the law of the country.

• The community as a whole

  • Business can affect the community with noise and pollution, but also create jobs and provide important services
  • Community wants jobs for its working population, a sustainable production that keeps the environment safe and safe products that are socially responsible.

• Bank

  • Provide finance to business
  • Expect timely interest payments and subsequent repayment of loan, which means that they want the business to stay liquid enough to be able to assure that.

What are the objectives of businesses in the public sector

• They focus on the financial aspect by trying to achieve the profit target set by the government
  • This can be reinvested for the business or handed to the government
• Service
  • Provide service to public such as postal service
• Social
  • Create employment in poor regions etc

The objectives between stakeholders can at times conflict. For example, the owner’s objective of profit maximization may result in production practices that can adversely affect the environment, which means that the interest of the community is conflicted. Managers have to compromise on the conflicting aims and make a mix that is best suitable for the situation. For example, if the economy is in recession, then growth can not be the aim. Instead, survival shall be focused.